INSTITUTIONAL Sales Material. Not for Distribution to the Public.
In either case, a major wave is fast approaching: the rapidly expanding retirement plan marketplace. It’s a continually
growing, fee-income-producing opportunity to attract new clients, expand relationships and grow your business.
Federated offers the support, tools and products you need to capture, keep and grow your share of the retirement plan
market. Our wholesale business model and heritage as an investment wholesaler mean we are completely dedicated to
supporting your efforts. You can count on Federated to deliver a wide range of solutions to help you respond to your clients’
retirement plan needs. We also understand that plan sponsors face important, and potentially expensive, liability issues
related to their role as fiduciary. Whether your client is a small start-up firm or a large corporation, Federated is committed
to help you meet your clients’ diverse needs with our investment solutions and tools and fiduciary expertise and guidance.
This guide is your resource for valuable information and ideas to help you develop and enhance your retirement plan business.
Are you looking for a way to complement
your core investment advisery business?
5 STEPS FOR SUCCESS
STEP 1: KNOW YOUR COMPETITIVE ADVANTAGE
• Be able to clearly differentiate yourself by communicating the benefits you can bring to plan sponsors and their employees
STEP 2: PROSPECT
• Determine your target market • Use your current skill set to prospect • Have a routine and follow up
STEP 3: IDENTIFY NEEDS AND CONCERNS
• Stay in consulting mode during the meeting
• Capture and analyze discovery data to identify the solution • Prepare a presentation that addresses concerns
STEP 4: PRESENT SOLUTIONS
• Confirm that all decision makers will attend your presentation • Clearly explain how each solution answers plan sponsor’s
• Discuss the importance of understanding and complying with fiduciary responsibilities
STEP 5: FOLLOW THROUGH
• When the answer is “yes,” set the next appointment • Monitor the conversion process
• Begin education process and plan maintenance • Develop strategies for after the plan goes active
This guide takes you through the general flow of the sales process and can help you monitor your
progress. It includes a full range of support and resources for you and your team.
KNOW YOUR COMPETITIVE ADVANTAGE
Before searching out and contacting prospective clients, it is
well worth the time to be able to articulate what makes you
different, better and capable of delivering beyond-expected
service, knowledge and support when it comes to their retirement
plan process. Here are two increasingly important ways to
differentiate yourself in the retirement planning marketplace:
SAMPLE ELEVATOR SPEECH
“My job is multifold. I
work very hard to make the
retirement plan a successful
benefit for the business owner
as well as the employees. I also
focus on guiding my clients
through the fiduciary process
so they can reduce the liability
exposure that goes with being
BE ABLE TO CLEARLY AND CONCISELY
PRESENT THE ADVANTAGES YOU OFFER.
Establish your knowledge and understanding of the plan
sponsor’s fiduciary responsibilities
• Although advisers may not have to sign off as a plan fiduciary, it is essential to communicate that you understand and take the client’s fiduciary
responsibilities seriously and are committed to supporting them throughout the plan review and development process.
Demonstrate your ability to help employees maximize their
savings and minimize their tax exposure
• Show how you can uniquely meet those needs. One way to do so is provide an example of a typical problem or need experienced by other plan sponsors and how you skillfully addressed it.
There has never been a greater need for sound retirement
planning solutions. That translates to more opportunity for
advisers—all the more reason to maximize the efficiency
and effectiveness of your prospecting efforts. Ideally, you
want to target qualified prospects that are most likely to
need and want your services. In this section you’ll find
ideas about how to get started and what tools to use for
prospecting and selling plans.
After you have defined your unique value, make sure you are focusing on the right targets.
Here are some popular sources and methods:
• Review your client list for business owners, human resource personnel and company executives.
• Become familiar with the sizes and industries of local businesses, starting with 10 you pass by every day on your way to the office, to help you narrow your target market.
• Access FreeERISA.benefitspro.com or databases such as PensionPlanet or Judy Diamond to search for prospects by zip code to become familiar with your target market’s retirement plans. (Your Federated retirement consultant can provide you with comprehensive PensionPlanet reports.)
• Use social media to your advantage. LinkedIn, Twitter and Facebook are increasingly important vehicles for sharing news and market insights with clients and prospects and to establish your retirement planning knowledge and expertise.
• Conduct a brief phone survey on a particular issue (e.g.: Qualified Default Investment Alternative (QDIA), safe harbor provisions, fiduciary issues).
• Consider cross-selling opportunities from affiliations, as well as members of business and social organizations.
• Consider conducting a seminar on current retirement topics. (Talk to your Federated retirement consultant about available seminar materials.)
• Consider speaking or hosting a booth at human resources and employee benefit conferences. • Search the internet for leads.
• Conduct a mail campaign, focusing on specific services that will interest plan sponsors. Follow up with a phone call. • Contact your Federated retirement consultant for additional ideas.
You can begin your mail campaign by sending a letter to your top 10-15 prospect companies. If
you uncovered any pertinent information from the prospecting databases, include it in the letter
to show you are informed and already bringing value to the prospect. Five days after the mailing,
follow up with a personal phone call.
SAMPLE PROSPECTING LETTER
(Your Organization’s Letterhead) Date
Title Firm Name Address
City, State, Zip Code Dear (NAME):
A retirement plan is a critical benefit that can help your company attract and retain quality employees. In working with companies like yours, I have found that many participants are not completely satisfied with one or more aspects of their plans. A growing concern among plan sponsors is the need for additional education and support regarding their fiduciary responsibilities. Has your adviser made you aware of them?
• Building an investment plan menu that is sufficiently diversified
• Knowing if sufficient numbers of employees are participating in the plan and ensuring they understand the plan’s features • Understanding the fees that your company and employees are paying
• Documenting discussions with your investment committee
Bottom line, are you and your employees getting the most value for your investment? If you answered “no” to any of these questions, I invite you to call me at (number) for a no-obligation consultation.
As your local financial representative, I am focused on delivering retirement plan solutions to companies in our area. Because I am an objective third party, I can analyze your plan’s features and performance to help uncover and assess potential fiduciary concerns, investment menu performance and overall effectiveness. If a change of advisers or
investment selection is the right solution, I can recommend an expertly managed, easy-to-administer plan or investment map-over option—all backed by a high level of personal service.
I look forward to meeting with you and helping you convey the importance of this significant benefit to your employees.
Investment Professional’s Name
TALKING POINTS GUIDE
• Follow-up call example
• Cold call example
• Overcoming objectives
As always, personalize your client communication with any specific information you may have discovered.
Follow-Up Call to Letter
Hello, Mr./Ms. _____________. Last week, I sent you a letter about retirement programs and services designed specifically for companies like yours. I’m calling to answer any questions you may have about it and to schedule a time when we can discuss your plan needs in detail. A number of my clients have found it particularly beneficial to go over their fiduciary responsibilities as plan sponsors and how they can be effectively met. Would this Thursday at 3 p.m. be convenient for you or next Tuesday morning at 10 a.m.?
Hello, Mr./Ms. _____________. I’m _____________, a representative with _____________, and I specialize in retirement plans. I’m contacting select businesses in our area to let them know about retirement plan options designed especially for companies your size. I’m sure you know how important this benefit can be to your employees. But what many businesses are increasingly concerned about is the extent of their fiduciary duty under ERISA as it applies to their retirement plans. Has your current adviser discussed this with you?
I’d like to schedule a meeting at your convenience to discuss all of your options and your fiduciary role in more detail. Would this Thursday at 3 p.m. be good or next Tuesday morning at 10 a.m.?
We already have a retirement plan.
I’m glad to hear that. It’s a sure sign you already know how valuable a retirement plan is to your employees and to keeping your company competitive.
Of course, if your company is following best practices, you regularly review the performance of your existing plan, the investments and the service that you and your participants are receiving. This could be a good time to evaluate your present plan. For instance, what is the rate of participation for your plan? Are you satisfied with the participants’ asset diversification and the level of service your current adviser offers? These are all part of your fiduciary responsibilities, and I make it my focus to ensure that you are protecting yourself by following ERISA guidelines.
When would be a convenient time for you to discuss these questions? Would this Thursday at 3 p.m. be good or next Tuesday morning at 10 a.m.?
Why don’t you just send me more information? If it looks like something we could use, I’ll give you a call.
I’d be glad to. I have an excellent brochure that gives you a good introduction to our services and investments and the other features and benefits available to your company. I have another brochure that does an excellent job of explaining fiduciary responsibilities. Since I’ll be in your area later this week, I’d like to drop them off personally. Would this Thursday at 3 p.m. be convenient for you? Or even next week, let’s say Tuesday morning at 10 a.m.?
To prepare for your first appointment, review these
insights. They will help you address common issues among
plan sponsors and demonstrate the value you bring to the
relationship. Often, you will find that concerns fall under
PLAN SERVICE AND ADMINISTRATION
Service and plan administration issues are key reasons for changing advisers. Start by asking the plan sponsor what they like about their current plan and what they don’t like, including the typical issues and problems they have encountered. Give them the time they need to share their experiences, frustrations and questions.
The key here is to really listen for and take note of “hot issues,” areas that are particularly important to the plan
sponsor and where their current adviser may be lacking. When you understand their specific concerns, you’ll be in a
position to provide a quality solution.
• Lack of coordination among the various parties. This could be creating service issues such as accounting and payroll errors or late statements.
• Current adviser has not been proactive regarding plan design, causing failed compliance tests. • Current adviser is providing an inadequate level of service or offers no local representation. • Recordkeeper may not have state-of-the-art technology to fit your employees’ needs.
• Recordkeeper is not staffed adequately or may be experiencing high personnel turnover, causing a lack of service continuity.
You can help by:
• Reviewing specific plan sponsor issues on a point-by-point basis and demonstrating your ability to provide superior service and support. • Demonstrating your understanding of fiduciary responsibilities.
Few topics in the retirement industry have been the subject of as much discussion, debate and uncertainty as the fiduciary standards that apply to plan sponsors. For advisers, this presents a strong opportunity and a significant responsibility.
In some cases, plan sponsors are not fully aware of their fiduciary responsibilities.
Your ability to educate and effectively support them in addressing these responsibilities can be a major factor in differentiating yourself in an increasingly competitive environment.
This checklist is a simple, but comprehensive tool to help you engage with plan sponsors in evaluating their progress in meeting fiduciary responsibilities.
Other plan sponsors are aware of these responsibilities and are demanding a higher level of fiduciary guidance and support.
As you look to grow your retirement practice, it’s important to evaluate the level of fiduciary support you are providing today, the level of support you seek to provide and the resources you need to deliver a higher level of fiduciary guidance. The fiduciary environment has changed considerably over the past several years and continues to evolve today. By keeping current on the dynamic fiduciary landscape, you are in position to help plan sponsors effectively navigate this critical aspect of their retirement plans.
(Federated is a nationally recognized authority on fiduciary law and practice. Your Federated retirement consultant can provide you with a wealth of resources on all aspects of fiduciary planning.)
Fiduciary Governance ¨ Establish formal committee
¨ Establish committee bylaws and charter
¨ Review annual roles of committee members
¨ Conduct committee meetings #/yr _______
¨ Document meeting minutes #/yr ________
¨ Review named ﬁduciaries and plan documents to ensure they are consistent
¨ Ensure ﬁduciaries are aware of their duties and responsibilities
When you’re a fiduciary, there are a lot of responsibilities and a lot of things to do in a year. Way more than you can possibly keep track of unless being a fiduciary is your only job. This checklist helps solve that problem. It’s comprehensive, so if you use it, you won’t forget or neglect any responsibilities or actions.
Company Name: Committee Members: Date:
Investment Oversight Process ¨ Review and update the IPS
¨ Maintain history of fund changes/mapping
¨ Review funds to ensure participants have adequate choice
¨ Document investment review and decision-making process
¨ Comply with plan default investment rules in the IPS
¨ Review company stock allocation; document its suitability as an investment option
Fiduciary Insurance & Bonds ¨ Review ERISA ﬁdelity bond coverage levels
¨ Consult with liability insurance provider for updates on coverage
Service Providers Fees & Services Review ¨ Review provider fees and services for
¨ Conduct FINRA/SEC check for advisor/ consultant
¨ Conﬁrm advisor’s ﬁduciary status in writing
¨ Review investment management fees for reasonableness
¨ Review and document selection of third party advice providers
¨ Acknowledge plan intent to comply with 404(c) regulations
¨ Comply with fee disclosure rules 408(b)2
¨ Review annual compliance due dates
¨ Review plan documents with ERISA counsel
¨ Review timing of contribution deposits
¨ Review trust agreements to ensure ﬁduciary roles are speciﬁed and accurate
Fiduciary Records Management & Documentation
¨ Establish a process of records management
¨ Distribute summary annual report to participants
¨ SSA 16 report received from service provider
¨ Provider service agreements updated
¨ Document all participant communications
¨ Review plan and trust documents
¨ Document investment due diligence reports
¨ Document ﬁdelity bond and insurance coverage
¨ Prepare, ﬁle and retain records related to Form 5500 Annual Report (including plan audit if required)
¨ Update plan administration procedures
¨ Review annual participant communication plan
¨ Audit participant mailing addresses and document process for lost participant searches
¨ Maintain records ﬁle of all participant education materials and investment materials
¨ Ensure plan provides required 404(a)(5) disclosures to participants in 401(k)-type plans
TOPIC! DATE! NEXT STEPS!
Many plan sponsors are disappointed with one or more aspects of their investment menu, the cornerstone of any retirement plan. Ask them questions to determine where plan assets are currently being invested. Talk to them about the available funds and the benefits of an investment policy statement to establish the menu’s objectives.
• Fund performance is not competitive.
• An investment policy statement has not been written or implemented.
• Current lineup of funds is not diversified (single fund family, missing style categories, overall unbalanced set of options). • Oversized fund lineup (20 or more).
• Undersized fund lineup (6 or fewer).
(Ask the plan sponsor for a list of the plan’s investments.)
You can help by:
• Creating a quality multi-manager fund lineup.
• Suggesting they implement an investment policy statement to better comply with their fiduciary obligations.
(Your Federated retirement consultant can provide you with sample investment policy statements. Federated’s alliance with fi360 supports you with complimentary reporting services.)
Although investing for retirement is often the most important financial goal for employees, many lack the knowledge to create a properly diversified portfolio on their own. Failure to address this problem not only threatens employees’ retirement security, it can lead to litigation by plan participants against employers who have failed to fulfill their fiduciary responsibilities. Because plan sponsors are now more aware of these obligations, they are increasingly receptive to the help of investment professionals. As you develop your relationship with the plan sponsor, you’ll be able to learn more about the plan and, as shortcomings arise, you’ll be there to offer solutions. With your investment and retirement plan knowledge, you are in a great position to help plan sponsors increase participation and deferral rates—while increasing your potential to gain additional individual clients and IRA rollover business.
• Unresponsive financial adviser.
• Lack of investment educational tools/programs for employees.
• Plan participants are requesting investment advice from the human resources department.
• Low participation rates. • Low deferral rates.
• Lack of participant diversification.
(Your Federated retirement consultant also can help you put together
Even if the plan sponsor is not ready to
Ask if you can present an investment education or retirement planning seminar to employees (both participants and non-participants). Explain the win/win situation:
• Current employees will receive on-site education. • Departing employees will get on-site education about
• Ongoing education will help the plan sponsor fulfill fiduciary obligations.
Plan sponsors are becoming increasingly aware of the need to understand the fees they are paying and the value they are getting from the service provided. Because fees have often been difficult for the plan sponsor to uncover and understand, the Department of Labor developed disclosure rules related to plan fees. Previously, plan sponsors often didn’t realize that there are administration fees and investment-level fees, or whether the plan was paying for some or all fees.
Service providers are required to provide this information to plan sponsors. You can help the plan sponsor get a handle on their plan costs and learn the specifics regarding current fees based on the information from their service providers. You can also help them understand that fees are typically charged based on plan asset size or number of participants.
Fee components may include:
1. Take-over or conversion fees—Employer • A one-time expense
2. Investment management fees—Participant • Charge by money manager
• Asset-based charge
3. Administrative fees—Employer or Participant • Annual fees for recordkeeping services • Base fee and/or per-employee cost • Asset-based charge
4. Transaction fees—Employer or Participant • Activity-based charges—loans, distributions • Dollar amount per transaction
• Asset-based charge
5. Insurance features—Participant • Mortality and expense-risk fee • Asset-based charge
6. Direct or indirect fees—Employer or Participant • 12b-1 fees
• Advisery fees
When analyzing fees, be aware of all the components that comprise retirement plan fees, who pays
these fees and the frequency with which they are paid.
Ask the plan sponsor for the plan’s fee schedule so you can determine the current charges. If it is not immediately available, you should gather three pieces of information:
• A list of the plan’s investment options. • Total assets in each investment option. • Name of the plan adviser.
The more information you can gather, the better prepared you will be to offer the best solution for the company. Federated’s Vendor Cost Comparison Worksheet and Vendor Comparison Checklist can help plan sponsors understand all fees—and who’s paying them—for their current plan and help them evaluate vendor costs during the bidding process.
COST ITEM VENDOR #1 VENDOR #2 VENDOR #3 Plan Startup Costs (conversion, document, education
Total ongoing recordkeeping fees
Company stock, if applicable Frozen funds Annual payrolls Distributions Other Trustee Fees Check Issuance Wire Transfers Securities Processing
Investment Management Fees By Fund
Back-End Loads Or CDSC Charges (by fund) and expiration. Does “laddering” policy apply?
Total “Wrap” Fees Total Annuity Fees Other Fees That May Apply
Ongoing Enrollment Booklets Additional Services
Client Requested Reprocessing, Print Job Requests, Additional Compliance Testing (per event), Deconversion, Periodic/ Installment PaymentProcessing, Proxy Labels and Fund Position Reporting, Amending RPSA Adoption Agreement, RPSA Approved Non-Standard Conversion Processing
Including: overnight courier service, travel, computer access charges, customer specific enhancements
VENDOR COST COMPARISON WORKSHEET
Your prospects can use this matrix to obtain a clear comparison of the total vendor costs.
* Fees will be accessed for out-of-pocket expenses incurred at the specific direction of the client.
Total Particpants = Total Assets = $ Average Account Balance = $
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779, 1-800-341-7400, FederatedInvestors.com G30933-03 (2/15)
Federated Securities Corp., Distributor Federated is a registered trademark of Federated Investors, Inc. 2014 ©Federated Investors, Inc.
VENDOR COMPARISON CHECKLIST
Use this checklist to help your prospect evaluate their current plan services. Plan Service and Administration
• Plan implementation and conversion • Electronic data transfer software • Data collection software • Dedicated conversion team • Prototype documents • Plan design/compliance services • Management reports • Local services from adviser • Daily valuation • Plan sponsor website • Participant website • Participant voice response unit
• Trustee services • Training • Annual plan review • 404(c) assistance
• 408(b)(2) and 404(a)(5) assistance
• Multi-manager investments • Annual investment review • Investment policy statement
• Plan announcement to employees • Enrollment meeting • Investment seminars • Pre-retirement seminars • Termination meetings • Employee investment advice • Participant statements • Participant newsletter
• Required disclosures, including fee disclosures
• Fund management • Insurance feature • Sales charges
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779, 1-800-341-7400, FederatedInvestors.com G30933-04 (2/15)
Use these questions during your first meeting with prospects to uncover their concerns. This
information will help you determine the retirement products and investments that are most
suitable for your prospect.
1. What type of retirement plan(s) do you currently offer? • 401(k)
• Roth 401(k) • Safe harbor 401(k) • Profit sharing plan • Money purchase plan • 403(b)
• SIMPLE-IRA • SEP-IRA • SARSEP • Keogh
• Defined benefit pension plan • Other
2. What are the most important reasons for having the plan, from an employer and employee perspective?
3. How many employees do you have? How many of them participate in the plan?
4. What are the plan’s total assets?
5. What types of assets does your plan hold? • Mutual funds
• Company stock • Stable value funds
6. Does your plan have an investment policy statement? 7. Does the plan provide for an employer match and what
is the formula?
9. Who currently pays administrative costs? • Employer
• Combination of both
10. Does your current plan meet your needs from a plan sponsor and participant perspective?
• How has your company changed since implementing the plan?
11. What features would you like to add or change about your retirement program and why?
• Easier administrative features
• Additional or better-performing investment products • Additional technology to help streamline processes • Understand and/or reduce plan fees
• Consideration of plan auto-enrollment and auto-escalation 12. Do employees feel they have suitable investment choices?
Do they understand investment concepts and risks? • What are the components of the current education program? • How often does your current adviser provide on-site
• How often would you like to meet with your adviser for educational or plan service sessions?
13. Do you, as the plan sponsor, feel you have been appropriately serviced by your current adviser?
• An appropriate investment lineup for your employees • Administrative and investment-level fees
• Your fiduciary responsibility of offering a plan • An investment policy statement to help monitor
suitability of investments and their performance relative to benchmarks
• Annual review of plan administration, investments, plan provisions and education program
14. As part of my services, employee education is critical. To accomplish this effectively, it may be necessary for me to meet with your employees individually and in group settings. • Are all employees of your company in one location? • How many locations do you have?
• Do you have employees who work from home or are on the road?
• Do you have multiple shifts?
• Would you allow me access to your employees during business hours?
• Is there a suitable space here to conduct group meetings?
Once you have gathered the discovery data, you should be
able to detect the main challenges of concern to your plan
1. Confirm that all decision makers will attend your presentation.
2. Show your understanding of key issues/concerns of the plan sponsor.
3. Present solutions, including a clear explanation how each one addresses the prospect’s concerns.
4. Demonstrate your understanding of fiduciary responsibilities and ability to offer in-depth support.
5. Establish next steps before ending the meeting.
Now that you have won the business, it’s time to prepare
for key next steps: plan conversion and employee education.
When executed correctly, these will go a long way in
creating a satisfied plan sponsor and establishing the plan’s
As an adviser, it is important to concentrate on the diverse components of plan conversion. This includes setting up the initial meeting between your client and the plan’s conversion team and ensuring that everything goes smoothly.
Your second focus will be preparing for enrollment meetings and an education campaign. Distributing all of the necessary information to your client’s employees about their retirement plan is an important aspect of ERISA regulations and meeting fiduciary obligations.
GENERAL GUIDELINES TO HELP YOU ORGANIZE YOUR EMPLOYEE EDUCATION PROGRAM.
Phase 1: Set-Up
• Conduct initial conference call with plan sponsor and conversion team.
• Review existing participant demographics including: participation rates, deferral rates, assets, diversification. • Review demographics of the employee base and develop
appropriate communication and education program strategy.
Phase 2: Enrollment
• Hold enrollment meetings.
» Distribute enrollment materials and summary of plan fees memo.
» Make fund prospectuses available.
• Direct participants to use voice response unit or website to make fund selections.
» Mail prospectuses to participants’ homes.
» Explain all 404(a)(5) disclosures that apply to plan participants.
Phase 3: When the Service Becomes Effective
• Inform participants when implementation is complete and there are no restrictions on account changes.
Ongoing: After the Plan Goes Active
• Hold enrollment meetings regularly. • Hold pre-retirement meetings.
• Offer individual rollover counseling for exiting employees. • Conduct seminars on investment topics.
• Survey employees regarding fund selection, plan features and communication.
RETIREMENT PLAN GLOSSARY OF KEY TERMS
401(k) Plan: A defined contribution plan that takes its name from, and is covered by, Section 401(k) of the Internal Revenue Code. Section 401(k) allows employees the option of deferring a portion of their salary and contributing it, on a pre-tax basis, to a qualified plan. 401(k) plans can offer: employee deferrals only or employee deferrals plus employer contributions. In addition, they can offer other types of employee contributions such as after-tax amounts or Roth contributions. Employer contributions to 401(k) plans can incorporate profit-sharing contributions as well as matching formulas based on elective deferral amounts. Deductible contributions are limited to an amount that is indexed for inflation annually.
404(a)(5): ERISA regulation requiring quarterly disclosures to plan participants regarding plan expenses and investment performance, meant to support employees’ ability to make informed decisions regarding their participation in their company’s retirement plan.
404(c): The Section of the Employee Retirement Income Security Act of 1974 that allows employers to significantly shift responsibility for selecting qualified plan investments directly to plan participants and beneficiaries. Meeting the requirements of 404(c) can reduce employers’ liability for the performance of the investments selected by participants.
408(b)(2): ERISA regulation requiring service providers that function as plan fiduciaries to provide in-depth and timely written disclosures to the plan regarding: fiduciary status, covered services, compensation, investment expenses, and manner of receipt of all compensation.
ADP/ACP Test: The Actual Deferral Percentage (ADP) test and Actual Contribution Percentage (ACP) test are annual tests of a 401(k) plan required by the IRS to ensure that salary deferrals and matching contributions made by or for highly compensated employees are within IRS limits of disparity when compared to deferrals and matching contributions made by or for non-highly compensated employees. If the ratio is too favorable to the highly compensated employees, the employer must either contribute more for the lower paid people or refund some of the excess contributions to those in the highly paid group.
Bundled Services: All investment, trustee and administrative services are provided by a single company or partnership program.
Defined Contribution (DC) Plan: A type of retirement plan defined by the amount that employees and employers contribute. In a defined contribution plan, each participant maintains a separate account balance. The value of the benefits that the employee receives depends on a number of factors: the amounts contributed to the plan, the assets selected, and the investment return of the funds selected. Some of the leading types of defined contribution plans are 401(k), money purchase and profit-sharing plans.
Defined Benefit (DB) Plan: A type of retirement plan that provides a guaranteed monthly benefit at retirement.
Employee Retirement Income Security Act (ERISA):
Passed by Congress in 1974, ERISA is the comprehensive employee benefits legislation that provides the rules with respect to employee benefit plans. It was enacted to protect retirement plan participants from misuse of their pension funds by their employers and insure that participants’ rights are protected.
Fiduciary: Within a retirement plan, a fiduciary is a person or entity that sets the plan’s policy, practices and procedures; one who controls the plan’s assets, or provides investment advice to the plan.
Forfeitures: Money not vested within a retirement plan that is left by participants who terminate employment prior to achieving 100% vesting in employer contributions. Generally, forfeitures can be reallocated among all remaining participants in the plan, or they can be used to pay plan expenses or offset future employer contributions, depending on the terms of the plan.
Hardship Withdrawal: An optional 401(k) plan feature that may allow participants to withdraw salary deferral contributions and some employer contributions from their accounts in the event of an immediate and heavy financial need. However, only an amount necessary to meet such a financial need may be withdrawn.
Highly Compensated Employee: An employee category used in compliance testing. It is determined by employee compensation, or 5% ownership of the employer. The compensation amount is indexed annually.
Key Employee: Generally, any employee who, at any time during the determination period, is a top 5% owner, a 1% owner with annual compensation greater than a specified indexed amount, or an officer of the company and earned more than the indexed limit.
Money Purchase Plan: A defined contribution retirement plan to which an employer must contribute a stated percentage of all participants’ compensation each year. The percentage may be up to 25% of each
employee’s eligible pay, up to the maximum dollar amount, indexed annually. The percentage must be stated in the plan document.
Participant Loan: An optional plan feature that allows participants to borrow funds from their accounts without incurring tax liability, as long as they repay their account. Loans must meet strict rules governing the amount and repayment terms.
Plan Administrator: Responsible for the administration of an employer-sponsored retirement plan, the plan administrator is usually the employer.
Plan Document: ERISA requires that plans “be established and maintained pursuant to a written plan document.” Essentially, a plan document contains the official, detailed guidelines for the plan’s operation, such as participation requirements, vesting, payment options, loan options, etc. A Summary Plan Description, as its name implies, is a summary of the key features of a plan.
Plan Sponsor: An employer who sponsors a retirement plan and is responsible for operating the plan according to the plan document, the trust agreement, and ERISA.
Profit Sharing Plan: A defined contribution retirement plan to which the employer makes a discretionary contribution each year. Each participant generally receives the same percentage of their eligible compensation. The contribution may not exceed 25% of the total eligible payroll or exceed the annually indexed maximum.
Recordkeeper: Provides recordkeeping services to a retirement plan. Among the services are maintaining participant accounts, processing transactions, preparing statements and performing selected compliance tests. The recordkeeper may also help prepare the Form 5300 used to apply for an Employee Benefit Plan determination letter. A favorable determination letter, issued by the IRS, states that the plan meets the qualification requirements under the Internal Revenue Code.
Rollover Contribution: A plan may be designed to allow participants to contribute—or rollover a distribution from a qualified plan with their previous employer.
Top-Heavy: A plan is considered “top-heavy” when the present value of accrued benefits for key employees is more than 60% of the present value of accrued benefits for all employees. A top-heavy plan must provide minimum contributions to non-key employees as well as accelerated vesting rates.
Trustee:Holds legal title to retirement plan assets for the benefit of
plan participants and facilitates the flow of information between the plan sponsor and the investment provider.
Trust Agreement: Details the methods of receipt, investment and disbursement of funds under a retirement plan. The trust agreement may be a separate agreement or may be included in the plan document.
Vesting: An employee’s right to employer-contributed assets within his or her account in the employer-sponsored retirement plan which is based upon a specified schedule.
FEDERATED PROGRAMS TO HELP BUILD YOUR RETIREMENT BUSINESS
A financial pioneer since 1955, Federated Investors entered the retirement business in 1974, managing
retirement assets for institutions. The firm has long served as a leader in fiduciary issues and as a
resource for fiduciaries and investment advisers across the country. Federated’s investment options
span domestic and international equity, fixed-income, alternative and money market funds, as well as
separately managed accounts, all designed to help investors pursue their financial goals.1
Best Practices for Building Retirement Business: We’ve spoken with top investment advisers around the country and distilled their experiences into a range of practical, business-building strategies.
Retirement Plan Prospector: This database includes more than 750,000 DC and DB plans and has 400 different searchable fields and plan analysis tools. We provide advisers with customized reports of the best leads for their business.
PensionPlanet: Through an alliance with PensionPlanet, Federated can help advisers generate leads through the industry’s most comprehensive, timely database of ERISA Qualified Retirement and Group Benefit Plans. With more than 2,800,000 records, PensionPlanet provides critical market intelligence and qualified leads on ERISA Plan Sponsors & Affluent High Net Worth individuals.
1 Federated Securities Corp. is the Distributor of the Federated Funds. Separately managed accounts are made available through Federated Investment Counseling, MDT Advisers and Federated Global Investment Management Corp., each a registered investment advisor.
Beyond Gravity: This program was created for advisers to use with investment committees. The content can be used with new committee members as well as existing members who need a refresher on understanding their roles as a fiduciary and how to best document their actions.
Fiduciary Planning Process: This guide ensures plan sponsors understand their fiduciary roles and duties. It walks plan sponsors through a review of their fiduciary responsibilities with a five-step process.
DOL Investigation Preparedness: This guide helps advisers and plan sponsors understand what happens in a typical DOL investigation. It contains a sample DOL notice letter, a checklist of the documentation a plan sponsor would need to have ready for submission and an example of the type of DOL findings a plan sponsor might expect at the end of the investigation.
Comparative Chart of Fiduciary Roles: This piece features charts comparing fiduciary responsibilities and level of authority for each of the different fiduciary roles contemplated by ERISA.
Guidance on Your Role as a Fiduciary: To help advisers understand the complexities and implications of doing business as fiduciaries, Federated offers a comprehensive set of white papers and informational guides.
Investment Rating System Delivers a Complete Plan Investment Analysis: Through an alliance with fi360—a leader in providing investment-related fiduciary education, practice management and support—Federated can provide technology to help advisers deliver an independent, thorough analysis of a plan’s investment menu. This investment rating system can help with investment selection, investment monitoring and highlights investments that contain potential deficiencies.
Insights from Retirement Industry Experts: Federated’s relationships with two of the most respected consultants in the retirement industry, Ann Schleck and Brad Campbell, give advisers access to valuable insights and expertise on critical subjects that can impact their business.
Trends in Retirement: This presentation gives advisers helpful perspective on participant attitudes and behavior, investment product trends and plan statistics.
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